(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; chart pattern in white; 50-period simple moving average in light blue.)
Price action on USD/JPY, a daily chart of which is shown, made a dramatic bullish move on Tuesday, breaking out above several entrenched resistance levels in the process. Most importantly, the pair has broken out above the 94.50 region, which represents the peak between a major double-bottom formation (around 87.00). Therefore, from a technical perspective, by breaking the peak between the two troughs, USD/JPY has confirmed a bullish double-bottom reversal.
There should soon be some corrective retracement or consolidation, but the bullishness on this move is unmistakable. Any further bullish momentum could soon reach the 98.00 support/resistance level, a strong breakout of which could target further resistance in the 100.00 region. This level represents not only a prior support/resistance area, but also a major psychological price level. Current support to the downside continues to reside around the 94.50 region in a classic case of resistance becoming support.
By James Chen, Chief Technical Analyst, FX Solutions
